Rail Budget merged with General Budget: Will it simplify and streamline decision-making within the government?

Zee Media Bureau

New Delhi: Ending 92-year-old tradition of having a separate Railway Budget, the Cabinet has decided to merge it with the General Budget and agreed in-principle to advance the date of its presentation in Parliament from the usual February end.

The actual date for presentation of the General Budget for 2017-18 will be decided by the government after taking into account the ensuing assembly elections, Finance Minister Arun Jaitley said.

The Cabinet has also decided to do away with the Plan/ Non-Plan expenditure classification in Budget 2017-18 and replace with 'capital and receipt'.

The government, Jaitley said, was in favour of advancing the Budgetary exercise to that it could be completed before March 31 and expenditure on public-funded schemes could begin from April 1.

He said: "While we in-principle are in favour of advancing the Budget date and finishing the entire financial business before March 31...The actual dates will be decided after consultations depending on calendar of the state elections."

The government, he added, is keeping itself in a "state of readiness" to advance the Budget presentation.

As per tradition, the Budget is presented on the last working day of February. A separate Railway Budget was started by the British in 1924.

Economic Affairs Secretary Shaktikanta Das said the Central Statistical Organisation (CSO) will provide provisional Advance Estimates of national income or GDP by January 7 so that the data can be incorporated in preparation of Budget.

Can Railways maintain its distinct identity?

Even after the merger, the distinct entity and the functional autonomy of the Railways would be maintained, Finance Minister Arun Jaitley has said.

Railway Minister Suresh Prabhu said that it was decided for merger of the Rail Budget with General Budget but distinct identity of the Railways will be maintained.

Following the merger of Budget, the Railways would not have to pay dividend to the central government though it would still get gross Budgetary support from the exchequer.

As far as the salary and pension bill of Railway employees is concerned, it will remain the responsibility of the national transporter as there will be no change in the existing practice.

A joint committee set up to finalise the modalities for the merger of Rail Budget with the general Budget in its report, submitted in the first week of this month, to the Finance Ministry recommended various changes including waiving off the payment of dividend by the Railways but continue with the practice of getting gross Budgetary support (GBS) from the exchequer.

Impact of amalgamation of Rail Budget with General Budget on Railways

Rail Minister Suresh Prabhu said the merger of Rail and General Budgets will not impact the functional autonomy of the railways but help in enhancing capital expenditure.

"One single Budget will mean Railway and General Budget will work in harmony," Prabhu said.

Railways will no longer have to pay annual dividends to the exchequer and maintain its functional autonomy after merger of Rail Budget with General Budget.

Railways will bear the burden of 7th Pay Commission, besides the regular salary and pension payments for its present and ex-employees.

At present, the wage bill of railways is around Rs 70,125 crore and pension bill is about Rs 45,500 crore while the annual fuel bill is more than Rs 23,000 crore.

Railways has to also bear an additional burden of aroundRs 30,000 crore on account of implementation of the 7th Pay Commission awards, besides an annual outgo of Rs 33,000 crore on subsidies for passenger service.

As far as the burden of concessional fare in different categories including sportspersons and patients is concerned, the government will constitute a separate committee to find out a way forward for it.

The existing financial arrangements will continue wherein railways will meet all their revenue expenditure, including ordinary working expenses, pay and allowances and pension from their earnings.

However, railways will not have to pay about Rs 9700 crore as dividend from the next fiscal though it will still receive gross Budgetray support from the exchequer.

The capital-at-charge of the railways estimated at Rs 2.27 lakh crore on which annual dividend is paid by the national transporter, will be wiped off.

The capital-at-charge represents the central government's investment in railways by way of loan capital and value of the assets created therefrom.

However Former Railway minister and Bihar Chief Minister Nitish Kumar has criticised the decision of Union cabinet to scrap separate Railway Budget and merge it with general Budget which he said would end autonomy of the largest public carrier in the country.

The Congress said that decision to merge both the Budgets has been taken to digress from surge in rail ticket prices.

Will the merger aid in faster implementation of decisions?

India Inc has welcomed the government's decision.

"The decision to merge the Rail Budget with the Union Budget and removal of the distinction between Plan and non-Plan expenditure are commendable initiatives to simplify and streamline decision-making within the government and move towards efficiency of resource use," CII Director General Chandrajit Banerjee said.

"Purely from a policy point of view, the recent Cabinet decisions sends a clear message that the government is orchestrating big bang reforms in a major way," he said.

"It is a good news as the Railways would able to focus more on core business of giving a modern and efficient transportation to the country," Assocham Secretary General D S Rawat said, adding that some of the populist demands on the Railways through annual Budget will no more be constrained for achieving the overall efficiency in a business-like manner.

Senior Economist at ICRA Aditi Nayar said that categorising expenditures as revenue or capital instead of plan or non-plan would increase the focus on reducing the revenue deficit and enhancing capital spending, setting the stage for an improvement in the quality of the fiscal deficit.

The decision to merge the Railway Budget with the General Budget is significant as in recent years political heavyweights, particularly regional satraps, have used this occasion to nurture their constituencies in a big way.